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Sönke Hellberg

1. Sep. - 31. Dec. 2011

The breathtaking expansion of the global microfinance industry in past decades has brought with it concerns about the cumulative environmental impacts of the activities and microenterprises financed by microcredit, particularly in developing countries, where microenterprises make up a substantial portion of economic activity and employment. “Green” microfinance is often described as the inclusion of environmental protection as the “third bottom line,” where mitigation of environmental degradation and promotion of positive environmental impacts is balanced with the financial empowerment of the poor borrowers and the financial sustainability of the microfinance institutions (MFI). While the integration of environmental protection as a condition of microcredit is not a new practice, many modern MFIs have become specialized microcredit lenders who have innovatively addressed the financial sustainability and incentive problems that have plagued NGOs, GOs and not-for profit organizations. Innovations in financial technologies have presented MFIs with opportunities to manage the higher transaction costs associated with integrating environmental protection. Our project will examine such MFIs in India, the largest of which have seen significant rates of growth in recent years. Of the biggest Indian MFIs that engage in “green” lending, how is environmental protection integrated? What mix of instruments (risk management systems, lending policies, educational programs, business development training, financing of technologies and other methods) are employed to integrate environmental protection? What is the relationship between the MFIs´ particular mix of environmental integration methods and their management of transaction costs?